What is a Dividend (or Distribution) Reinvestment Plan?

And why would I want to opt in or out of it?

The Low Down on Dividend (or Distribution) Reinvestment Plans

Dividend (or Distribution) Reinvestment Plans otherwise known as DRP’s are a type income distribution option that some share holdings provide to their shareholders.

If you own shares then the DRP will be referred to as a Dividend Reinvestment Plan (as shares are paid dividend income).

If you own ETF units then the DRP will be referred to as a Distribution Reinvestment Plan (as ETF units are paid distribution income).

If you have selected to be paid dividends or distributions via a DRP then your income will be automatically reinvested in purchasing more shares or ETF units (to the value of the dividend or distribution).

Example – If your dividend payment was $50 and the share price was $25 you would have an additional 2 shares added to your portfolio instead of a cheque / or bank deposit of $50.

What options do I have in terms of being paid my dividends or distributions?

You can opt to have your dividends or distributions paid to you in the following ways:

  • Bank Deposit
  • Cheque
  • Dividend (or Distribution) Reinvestment Plan (if offered)

Do all share holdings offer a DRP?

No. Not all holdings offer the option of a DRP, and if this is the case you will need to opt for one of the other options to receive your dividends/distributions.

That said as DRP’s become more popular I’ve recently noticed a trend where some holdings automatically opt you into the DRP, and you have to opt out of it if you don’t want to participate (example – DHHF ASX | High Growth ETF Australia | BetaShares).

What are the benefits of opting into the DRP?

  • No temptations – This was an important consideration for me. For me being enrolled in DRP means my portfolio is constantly growing, and I’m not tempted to spend my income elsewhere.
  • No brokerage fees – There are no brokerage fees passed onto you within a DRP, which is a significant money saver over time as trades can cost upwards of $20 per trade.
  • Supports a Dollar Cost Averaging approach – If you subscribe to DRP you are by default opting for a Dollar Cost Averaging approach. This approach suits those who are in it for the long haul, and aren’t trying to time the market. You have no control of the price of the shares you are purchasing within a DRP, and therefore sometimes the shares you receive through DRP will be overvalued and sometimes they will be undervalued at the time you receive them. Regardless the principle around dollar cost averaging is that over time this will even out and won’t be an issue.
  • KISS Approach – DRP keeps things pretty simple in terms of managing your income payments, and will suit those who enjoy a hands off approach to investing.
  • Compound Effect – DRP is a great way to quickly build and grow your portfolio as each time you are paid a dividend you will receive a larger number of shares than the last pay-out (This is based on the assumption that the dividends are unchanged).

What are the considerations of opting into a DRP?

  • Lack of Control – If you like having a hands on approach to your portfolio and investments then DRP might not suit you. You will not have any control over the price and timing of the purchase of shares under a DRP, which may result in you buying shares at the higher price than you would if you purchased them yourself. That said if you are planning on holding your shares for the long term then the nature of DRP means that the price paid for your shares should even out over time.
  • Unbalanced portfolio and/or reduced diversification – DRP involves the automatic purchase of shares in the same holding, which means your portfolio may become unbalanced over time. This can be an issue for those with a portfolio where they manage the balance of asset classes and diversification of holdings.
  • Not for short term investors – DRP isn’t recommended for those who are not looking at holding shares for a long period of time. Short term investors would likely be better off opting for a direct payment (bank deposit or cheque) and purchasing additional shares separately.
  • Not for those who are dependant on dividends/ distributions as an income stream – If you are looking at drawing an income from your dividend/ distribution stream (eg retired) then DRP isn’t for you as any income is turned into shares.
  • Record Keeping – DRP requires additional record keeping (sad face). You will need to keep records of the purchase price and dividend/distribution payment amount every time a dividend payment is made. Sharesight provide a really great guide here for more information.

So how do I update my Income Distribution Options?

Head on over here to an article I wrote on How to opt into a Dividend (or Distribution) Reinvestment Plan and it will give you all the details.

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Should I start a Sharesight Account?

So you’ve started investing and want to know what the deal with Sharesight is. Well here is my personal experience, and my plans for use in the future. Please note that none of the links within this article are referral or affiliate links. I receive no benefit from Sharesight at all for sharing my experience.

So what is Sharesight?

Sharesight sells itself as the Best Share Portfolio tracker for Australian Investors. In a nutshell it’s a web application accessed through your web browser (i.e Google Chrome, Safari, Edge etc) that allows you to track your shares, your portfolio performance over time and gives you access to investment reporting.

How much is Sharesight?

Sharesight is FREE for those with 10 or less shareholdings, which makes it a popular choice for new investors looking for a simple to track their portfolio. For those with over 10 holdings or those who are wanting some of the more advanced features of the platform then prices start at $19 a month (and max out at $48 a month). Pricing information is available here.

What does the Sharesight platform look like?

Sharesight is quite easy to use and easy to understand. The user interface is quite simple with clear menu tabs at the top providing the following options;

  • Overview Tab (as per screenshot) – This gives you an overall view of your portfolio as per your own personal settings (including timeframe, graph type eg line, stacked, or growth, and lastly you can also view by group). I personally like to keep it simple and like to see my calendar year, stacked graph type and default grouping.
  • Holdings Tab – This provides you with a sub menu to view your holdings individually and then drilldown into their individual performance. It provides you with a summary performance graph, a breakdown of trade cost and date, current holding details (eg share price) and any income associated with the holding (share).
  • Reports Tab – This tab provides you with a list of 10 reports. 6 of these reports are included in the FREE version of Sharesight and the other 4 are available in the paid options. Sharesight offers a sample of the paid reports so you can try before you invest in a paid membership.
  • Settings Tab – This tab allows you to customise your portfolio to your current setup. It has a range of different settings you can customise from basic settings like the name of your portfolio to more complex settings. You can adjust tax settings for use as an individual, , trust, company or SMSF in this section. You can also customise the frequency of Sharesight alerts to your inbox (I enjoy getting my weekly portfolio summary). Lastly you can share your portfolio with others which is great if you have a partner who doesn’t want to set up an account but wants to stay informed (eg like mine).
  • Integrations Tab – Full disclosure I haven’t used any integrations during my time with Sharesight, however I feel its important to note the features available including Xero integration (please note this integration is only available to those on investor or expert plans). There are also integrations available within in the free plan that may be appealing including auto recognition of trades via the emails that your broker sends you each time you make a trade (buy or sell). I personally prefer to add mine in manually, but each to their own.
  • Help Tab – Lastly the Help tab links you to Sharesight Community, the Sharesight Blog, and contact details to send a specific issue you may have to the Sharesight team.

How do I get started with Sharesight?

It’s fairly straightforward setting up your Sharesight account itself, and you just need to provide your email account and basic personal details.

How do I add my previous trades (buy/sell)

When I started with Sharesight I had already been trading shares for a couple of months and had to add my trades in. Adding your trade history is a lot easier than it sounds and Sharesight gives you three options:

  • Import from a Broker (if your broker is listed here )
  • Manually add a trade
  • Import from CSV (Excel file)

What are my favourite features of Sharesight?

  1. The overview performance page of Sharesight is great, and I challenge you to try not to log into it everyday once you sign up (it’s pretty addictive tracking your progress and seeing your portfolio grow).
  2. The FREE End of Year Taxable Income Report is a real game changer for helping you manage your end of financial year tax obligations. I manage my tax myself and this report makes it easy to continue to do so.
  3. Lastly I’m a bit of a one trick pony when it comes to investing (I choose to invest in only one holding currently), however I love the Share Checker function. Its located next to the Add Holdings button on the Overview Screen (see screenshot below). It allows you to enter a holding and check the performance of $10000 invested in it over a set period of time (eg the calendar year). It then provides you with some really powerful insights into where you would be.

So should you set up a Sharesight account?

It’s 100% free to start a Sharesight account provided you don’t have over 10 holdings. As Sharesight is a financial product I’m not qualified to give you any recommendation on this product so please check out the links and make your own mind up.

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The ‘Anti-Meal Plan’ for people who don’t like to Meal Plan

Like meal planning? Yep me neither, but I do like the benefits that come with meal planning such as keeping within a budget.

We keep a fairly tight food budget of under $150 a week for a family of 4 (two adults and two pre-teen boys at the time of writing this). In order to keep our costs low week after week I’ve developed a system which keeps us under budget without too much effort, and today I’m sharing it.

I call it the anti-meal plan because its a plan you only do once (you can do it more if you want to but I don’t), which really appeals to us.

So what is our Anti-Meal Plan? Well its really a bit of a throwback to simpler times with a modern twist. We simply have allocated a certain meal type to each day of the week. The idea around the Anti Meal Plan is that its a 7 Day Meal Plan for the year that is flexible enough to allow you to not be too bored, but allows you to still keep within your budget.

In order to stick to our budget I allocate 60% of our grocery budget to dinners, which works out to be $90 (your budget might be higher or lower than ours so adjust to your needs). Then I split this amount 7 ways. You can do this equally if you wish or you can do what we do which is have a mixture of low cost meals mixed in with higher cost meals. This way you still can enjoy what you love on occasion.

The Anti-Meal Plan

Step One – Allocate an amount for each day of the week dependant on your budget (I use a 60% total food budget rule for dinners).

  • Monday – $10 meal day
  • Tuesday – $15 meal day
  • Wednesday – $10 meal day
  • Thursday – $15 meal day
  • Friday – $5 meal day
  • Saturday – $15 meal day
  • Sunday – $20 meal day

Total Budget for Dinners – $90

Step Two – Come up with a flexible meal for each day of the week

I’m sure this will be the hardest step for most people, but my advice to you is to keep it as flexible as possible. This will allow you to still take advantage of reduced to clear items, weekly specials and seasonal produce. Below is a copy of my plan – it might sound boring, but it honestly isn’t as there are so many choices and flavour combos that we can have within each one. For example Saturday is sausage night, but that can mean any meal with sausages in it. There are a million and one different recipes with sausages in it. Our favourites are sausage pizza, hot dogs, sausage casserole, bangers and mash, curried sausages, homemade sausage rolls, and I even make meatloaf from good quality sausage filling on occasion.

Our Anti-Meal Plan for our dinners is as follows;

  • Monday – Pasta Night
  • Tuesday – Asian Night
  • Wednesday – Pasta Night
  • Thursday – Fake-away Night
  • Friday – Breakfast Dinner or Leftovers Night
  • Saturday – Sausage Night
  • Sunday – Roast Night

Step Three – Write your meal plan down and place a copy on the fridge / and in your wallet / phone

The more places you write this plan down and see it the more likely you are to stick to it. It’s vital to take your plan with you when you go shopping as this will help you stay within your budget (I carry around a screenshot of it on my phone and the amounts I’ve allocated with me).

The Most Important Step – Please remember that the great thing about the Anti-Meal Plan is that if you are feeling imaginative you can change it. If you are suddenly inspired then throw your anti-meal plan out for the week and change things up a bit.

The Anti-Meal plan is designed to be there as the ultimate back up system to ensure that even when you can’t be bothered meal planning in the traditional sense that you can still keep within your budget.

A copy of my Anti-Meal Plan is located below as well as a blank version that can be printed.

I would love to see and share any versions of your Anti-meal plan on Instagram so please tag me @FrankOnFire_

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How many goals should I work on at a time?

As many as you want if you are achieving them…..but if you’re not read on

Do you set yourself a number of goals every month and wonder why you might be coming up short from achieving them? Do you set yourself SMART goals but still find yourself falling short? If yes read on.

I had the same issue when I started working towards my savings goals until I made one change, and that change was life changing for me. One day I stopped working towards multiple savings goals and instead just worked on achieving one goal at a time.

Making the change wasn’t easy to do especially when I would see other people set and achieve their numerous goals. I couldn’t help but compare myself, and wonder what was wrong with me.

Over time the idea of tackling just one goal made more and more sense to me. When you have debt the general consensus on the best way to pay off your debts are one at a time (regardless of the debt snowball or debt avalanche method). So why shouldn’t your post-debt savings goals be tackled in the same way.

Tackling one goal at a time allows you to immerse yourself completely in your goal and your steps towards it.

I honestly believe this is one of the key reasons we’ve been so successful in working towards our goal of 90k in shares in 2020:

  • Its the only goal I have to think about,
  • the only one I have to create a plan for,
  • the only one that’s on my fridge,
  • the only one I need to manifest,
  • and the only one my husband needs to worry about as well.

That last one is super important because my husband doesn’t have the world’s best memory, and reaching our goal is 100% dependant on us both being on the same page.

And if you don’t want to take my word for it take it from the many studies that have been done which show that focusing on one thing at a time is one of the best ways to be more productive. When we immerse ourselves fully into a desired task or goal it allows us to give it our full attention. This in turn improves the chances of us achieving our desired outcome for the task or goal.

I know for me that single goal-making as opposed to multi goal-making has resulted in being able to really fine tune the plan to hit our goal, and make adjustments after an obstacle instead of just throwing in the towel. I also know that if we don’t meet our goal it won’t be for lack of effort on our part. Even the best laid plans don’t always work out, and I know we’ve given 100% to this goal. Regardless of the outcome we have reached higher and further than we have before, and I know that this is because we have been singularly focussed on just one goal.

So if you are struggling with hitting your goals I strongly encourage you to try making just one goal, and focus all of your energy into reaching it.

You’ve got nothing to lose from trying this and everything to gain.

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Photo by Engin Akyurt on Pexels.com

5 ways to increase your chances of achieving your financial goals

  1. Track your goals

Have you ever heard the saying ‘What isn’t measured isn’t managed’? Now those who know this saying will know that this statement doesn’t apply to everything. That said I strongly believe that measuring or tracking your progress in regards to your financial goals allows you to visualise your progress better. I believe the ability to track and visualise your progress will increase your chances of sticking with it, and staying the course.

If you are looking to track a financial goal (eg pay off a debt or save money) there are some great digital trackers available including my Personal Budget and Automated Dashboard (with inbuilt debt, savings goal, mortgage, and EF tracker).

If you are looking to track your habits feel free to take a look at my Digital Daily Habit Tracker.

  1. Share your goals

Don’t hide away from your goals, make sure you put your savings tracker on the fridge (or in another visible location). My husband thought I was silly placing our ‘100k in 2020 tracker‘ on the fridge at the start of 2020, and colouring in my progress each pay. Over time he started asking me if we could take turns colouring the progress in, and by the end of it he was 100% on board. We also don’t hide it away when friends come over. I still don’t bring it up, but I’m open to the discussion if anyone asks me about it. I’m proud of our goals, and I’m keen to remove the stigma of talking about finances in the hope that we can all learn and share together.

Use a Savings Tracker like this
(https://frankonfire.com/2020/10/20/free-printable-52-week-savings-challenge/
  1. Make sure your goal is SMART

By this I mean your goal follows the SMART goal criteria

  • S – Specific
  • M – Measurable
  • A – Attainable
  • R – Relevant
  • T – Time-bound

If you’re not familiar with the SMART goal criteria there are some great SMART goal templates here to get you started.

By using the SMART goal criteria you improve your chances of success by ensuing you have an achievable plan for your goal, and aligning the goal to your values. There is no point coming up with a financial goal that is vague – eg: I just want to save money. Or one you can’t achieve financially. Or one that doesn’t have a timeframe. Or one that simply doesn’t align with your own values.

  1. Reward Yourself

I’m a huge fan of the saying ‘Treat Yourself’ once I’ve reached a goal or milestone. I feel rewarding yourself assists with the positive feedback look that progress tracking starts and then helps you gather up the energy for the next goal sprint.

We will be rewarding ourselves with an dinner in one of the best restaurants in town once we reach 100k at the end of the year (and I can’t wait).

  1. Progress not perfection

No journey to any goal is without hurdles. Hurdles come in all forms:

  • Financial – eg. Car breaks down.
  • Work – eg. Job loss or hours being cut.
  • Animals – eg. Unexpected pet bills.
  • Health – eg. Work related burnout or a new or existing health issue.
  • Family Issues – eg. Sudden loss of a family member/or friend.
  • Unexpected Surprises – eg. a new baby.

When these hurdles come (and trust me they will) you need to remember that its okay to take a moment to review and perhaps readjust your goals.

Let me make this clear ‘readjusting your goals doesn’t mean you’ve failed’

Taking a break, reducing your goal amount or increasing your timeline is the opposite of failure.

All progress towards your goals is still progress even if it wasn’t as quickly as you had planned, or in the way you wanted.

Remember ‘Progress not perfection‘ and let it be your mantra.

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Free Printable – 52 Week Savings Challenge

If you want to improve your chances of reaching a goal you need to track it, and I’ve created a free printable to help you do just that and track your yearly savings goal.

I have also created a 52 Week Free Investing Challenge Printable for those with an investment goal you wish to track. Check it out using the link here.

To use the 52 Week Savings Challenge printable:

  1. Print it out using the download button below (no sign up required).
  2. Write down your savings goal in the space provided.
  3. Divide your savings goal amount by 52 to determine how much each coin will be worth (and how much you need to save each week). Example : $10000 / 52 = $192.31.
  4. Document the coin value in the space provided.
  5. Place your tracker in a place that you will frequently see (I place mine on the fridge so even the kids know what we our goals are).
  6. Then get colouring and hitting those goals

If you want to read more about how you can increase your chances of achieving your financial goals – take a look here.

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Hello, here’s a short genesis story

First posts are hard, but not as hard as buying your first shares…….

Until mid 2019 I thought I had life figured out. I had ticked all the boxes of what I had been told by ‘everyone’ that I should be doing financially. We were in our dream house, paying our mortgage down, we took overseas holidays, and I had a secure job.

But I wasn’t happy.

My lifestyle was extremely dependant on my job and working on someone else’s terms for the next 35 years. I had no idea how to grow my wealth beyond paying down my mortgage and maybe after that contributing to my superannuation.

Like many of you reading this I wasn’t financially literate enough to understand wealth or wealth building beyond buying a house and paying off my mortgage. I grew up poor, during a recession, and when home loan interest rates were 18%. My parents were very young and did the best they could by teaching me to be frugal, develop a strong work ethic, and to be resourceful.

In High School I participated in the ASX Share Trading Game and managed to lose the most money in the class in the process. Despite no real shares being purchased and no money being lost this experience solidified my desire to never invest in shares. I told myself that the share market wasn’t for me, and I was best to leave it to rich people.

Fast forward to mid 2019 when I discovered the FIRE movement and started my journey towards financial independence on my terms.

I happened upon FIRE by accident. I have always been a big #debtfreecommunity follower via Instagram, and I started to see hashtags for FIRE on several people I followed posts. So whilst scrolling down the rabbit hole that is Instagram I found a post for an upcoming movie called ‘Playing with Fire’ and it was based on a book of the same title. Someone had used the free audiobook deal from Audible to listen to it, and recommended it.

With zero risk I then used the exact same deal to listen to the Audiobook, and I was positively hooked within about 15 minutes (I’ve since purchased the movie worth every cent by the way). For me what stood out about the story and FIRE movement was the simplicity of the concept.

“If you save / invest 25 times your annual expenses you can retire early”

For me this felt achievable as I was already quite good at the saving money to pay off debt side of things, but I had no idea how to grow wealth. The book also introduced me to the term ETF’s (Exchange Traded Funds) which were something I had never heard of before (and not covered in my High School share trade class).

Suddenly I was inspired to learn everything I could about reaching financial independence and decided to start an Instagram account called Frank on FIRE to track my journey (and keep myself honest).

At this early point of my journey ‘I’ hadn’t turned into a ‘we’ yet. My husband didn’t know about my new ‘cult’ as he would initially call it, and it would take a little convincing for him to come on board. I look forward to writing about that experience.

So now that we’ve been on the FIRE journey for over a year I thought it was time to finally have a grown up blog to share even more of our journey.

xx Frank on FIRE

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